[Congressional Record Volume 144, Number 136 (Friday, October 2, 1998)]
[House]
[Pages H9337-H9338]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               IMF REFORM

  The SPEAKER pro tempore. Under a previous order of the House, the 
gentleman from Texas (Mr. Armey) is recognized for 5 minutes.
  Mr. ARMEY. Mr. Speaker, today the President called for a further 
expansion of the International Monetary Fund. He repeated the audacious 
request that Congress provide $18 billion to the IMF with no conditions 
and without first requiring IMF reform.
  It is time for some presidential accountability, Mr. Speaker, in this 
area as well as others. We need to recognize that it was the Clinton 
administration's own policies that accelerated the financial collapse 
overseas that is threatening the United States' economy today.
  For Congress to simply endorse those policies through the full 
funding of an unreformed IMF would be recklessly irresponsible. If the 
President will not, or, as yet another consequence of his diminished 
leadership, cannot bring about real changes in international financial 
institutions, then Congress must supply leadership in his place.
  The IMF proposal actually illuminates a major policy departure that 
has developed largely unnoticed by Congress, the press and the public. 
Unnoticed, that is, until it was too late. I call it the Clinton 
Doctrine. It is a policy under which virtually any groupings of 
bankruptcies anywhere in the world is eligible for a bailout by 
American taxpayers.
  This has inflamed what economists call ``moral hazard''. By covering 
bad investments, the administration has encouraged irresponsible 
behavior. The financial disasters overseas are in large part a direct 
consequence of this ``moral hazard''.
  To make matters worse, once the financial collapses occurred, the 
IMF, presumably with the President's blessing, imposed catastrophic 
contractionary policies on the affected countries. Even Keynesians, Mr. 
Speaker, know not to raise taxes in a recession, and yet that is 
exactly what the Clinton-guided IMF often proposed. As Larry Lindsey 
put it, these policies have become our own era's equivalent of the 
Smoot-Hawley tariff.
  In fairness to the President, he did not initiate this policy of 
global bailout which we have been drifting towards for some time. His 
role has been to sanction it, legitimize it, and to take it to new and 
unprecedented levels. Beginning with the 1995 bailout of Mexico, 
continuing with the multiple bailouts of Asia, and reaching its 
inevitable culmination in the farcical bailout of Russia this summer, 
the administration has undermined market discipline and helped to 
create the very crisis it was ostensibly trying to prevent.
  The IMF, under the direction of the Clinton administration, helped 
cause the problem. Then the IMF made it worse. Now it is making it more 
difficult for the world to recover. The IMF, Mr. Speaker, has the Midas 
touch in reverse. Virtually every country it has tried to help has 
become worse from the experience.
  In Korea today, children made homeless by the continuing recession 
are bitterly referred to as ``IMF Orphans''. Our friends in Korea know, 
as many in the Clinton administration do not, that the IMF is largely 
responsible for their continuing economic difficulties.
  Congress must reverse this Clinton Doctrine that has helped bring the 
world economy to its current state. A positive step would be to 
restrain the IMF by deferring a decision on providing the huge $14.5 
billion quota increase. This is essentially the House position 
contained in the foreign operations bill.
  Delaying a decision on the IMF money would allow us time to hold an 
international conference and other meetings to improve the world 
financial system. The disasters we see overseas are clear evidence that 
the current arrangements have failed. Rather than pump more money into 
them, we need to redesign them. We need nothing less than a new Bretton 
Woods conference. Only then can we make an informed decision on giving 
away $14.5 billion of our taxpayers' money for those purposes.
  Now many, including many in this House, say that we should give the 
IMF money up front in exchange for ``real IMF reforms''. What they do 
not understand is that the administration and the IMF are adamantly 
against any U.S.-imposed reform. As the French director of the IMF 
arrogantly put it last week, ``The U.S. must bring its contribution and 
no country is entitled to impose conditions.'' That from the head of an 
agency that imposes conditions on each and every country to which it 
brings its money, and all too many times, as I have cited, conditions 
that do harm rather than good.
  The most the administration and other IMF supporters will accept are 
weak suggestions from us. The reform provisions in pending IMF bills, 
for instance, are a little more than sense-of-Congress resolutions.

[[Page H9338]]

  So, Mr. Speaker, if Members are serious about doing a money-for-
reform trade, I suggest they adopt this principle to start with: No IMF 
reform is real IMF reform until IMF adopts it before it receives any 
additional money from the United States.

                              {time}  1630

  This, in my judgment, is plain common sense. We do not give away $18 
billion of our taxpayers' money on the strength of a promise or on an 
assurance. Any reform provisions that do not meet this principle should 
be rejected out of hand.
  What should these reforms involve? If our aim is to reverse the 
destabilizing influence that the IMF has had on the world's economic 
and financial system, we should insist on these:
  One, real transparency requirements that will allow us to open their 
books and see what in fact they do, what are their resources and what 
do they do with them.
  Two, a ban on the IMF offering of low interest rates below the 
market. This is very important if we are going to stop this business 
called moral hazard. It is the oldest story in economics: If you 
subsidize bad decisions, you get more bad decisions.
  Three, a 1-year limit on all IMF loans. When we do that, we again 
signal to the world, they do not have permanent bailouts for loans or 
activities that prudent people would not have undertaken in the first 
place.
  I am not naive, Mr. Speaker. I can count votes and I know this is an 
uphill fight, but it is one we must make even in the waning days of 
this Congress. In the end, Mr. Speaker, it comes down to first 
principles. My party believes in freedom and responsibility. Guided by 
those values, we have resisted the status temptation and instead led 
America into this era of limited government and broad prosperity. How 
can we then acquiesce in a plan to vastly expand an international 
agency that covers other people's bad debts and undermines free market 
processes the world over?
  No, Mr. Speaker, it is time to bring the reforms, the discipline, and 
the responsibility that make this Nation great to all the world's 
nations through all the transactions and institutions that this Nation 
supports and it tries to influence.

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